U.S. plans more aid for farmers amid China trade spat

FILE PHOTO: A farmer harvests his field at his farm in Pecatonica, Illinois, U.S., July 25, 2018. REUTERS/Joshua Lott/File Photo

May 10, 2019

By Tom Polansek, P.J. Huffstutter and Humeyra Pamuk

CHICAGO/WASHINGTON (Reuters) – U.S. Agriculture Secretary Sonny Perdue said on Friday that President Donald Trump had asked him to create a plan to help American farmers cope with the heavy impact of the U.S.-China trade war on agriculture.

A new aid program would be the second round of assistance for farmers, after the Department of Agriculture’s $12 billion plan last year to compensate for lower prices for farm goods and lost sales stemming from trade disputes with China and other nations.

“While China may backtrack, @POTUS is steadfast in his support for U.S. farmers and directed @USDA to work on a plan quickly,” Perdue said on Twitter on Friday.

The latest round of trade talks between Washington and Beijing ended on Friday after 90 minutes, the same day increased tariffs on Chinese goods went into effect. Trump said talks would continue but there was “no rush” to reach a deal.

The toll on U.S. agriculture has been heavy, in a sector that has largely been supportive of Trump. Soybeans are the most valuable U.S. farm export, and shipments to China dropped to a 16-year low in 2018, while soybean futures prices fell this week to 11-year lows – and once again closed down on Friday.

“I think he’s finally realized that the Chinese tariffs have put a real strain on the countryside, and that if more tariffs are put on, the strain is going to get even worse,” said Tom Vilsack, who was USDA secretary under Democratic then-President Barack Obama.

A USDA spokeswoman declined to give further details on the plan.

The American Farm Bureau Federation said it was too soon to throw its support behind the potential program, as did the American Soybean Association. But U.S. hog farmers were quick to support the idea of additional government purchases.

“It is fair and right that the U.S. government purchase significant quantities of pork over the next 18 months to ship as food aid to help ease the financial burden placed on producers,” said David Herring, a pork producer from Lillington, North Carolina, and president of the National Pork Producers Council.

Trump on Twitter erroneously wrote that China would pay the tariffs. However, it is the importer – usually U.S. companies or the U.S.-registered units of foreign companies – that shoulder the costs.

“With the over 100 billion dollars in tariffs that we take in, we will buy agricultural products from our great farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance,” Trump wrote on Twitter.

However, any funds from U.S. tariffs go into the U.S. Treasury’s general fund, and Congress – not the White House – directs U.S. spending.

“I don’t think he understands that he’s not a dictator,” said Vilsack, who is now chief executive of the U.S. Dairy Export Council industry group. “He can’t just order this to happen.”

U.S. Customs and Border Protection collects the tax on imports. The agency typically requires importers to pay duties within 10 days of their shipments clearing customs.

Until this week, the White House’s budget plans had called for a dramatic, 15% cut for USDA, calling its subsidies to farmers “overly generous.”

The White House previously used Commodity Credit Corporation (CCC) funds to offset farm income losses in trade disputes. The CCC is a branch of the USDA that has broad authority to make loans and direct payments to U.S. growers when prices for corn, soybeans, wheat and other agricultural goods are low.

POSSIBILITIES FOR AID

Perdue said last month when the United States and China looked to be making progress toward a trade deal the Trump administration did not have plans to provide farmers with more aid.

In the past week, however, the draft trade deal fell apart after sources said China reversed on previous commitments.

Farmers have largely supported Trump but have been among the worst hit by the continuing trade war with China. Farm debt has spiked to its highest in decades and credit conditions in the rural economy have worsened.

Two possible outlets Trump could use for sending government-purchased agricultural goods to countries overseas include the Food for Progress food aid program, in which U.S. agricultural commodities are donated to developing countries, and the Food for Peace program, which also provides U.S. food assistance, according to farm economy experts.

But Trump’s budget proposed cutting funding for both of those programs. In addition, many products hardest hit by the U.S.-China trade fight – such as soybeans – are used for animal feed, not food for human consumption.

Until the trade war, China bought $12 billion per year of soybeans from U.S. farmers.

“It is hard to sit in my shoes and see no deal is made,” said Lorenda Overman, 57, a grain and soybean farmer in North Carolina.

“We need a deal. We have borrowed from our life insurance policy, that’s how desperate we are. We are desperate for something to happen. We need help.”

(Reporting by Humeyra Pamuk in Washington and Tom Polansek and P.J. Huffstutter in Chicago; Additional reporting by Karl Plume and Rajesh Kumar Singh in Chicago; Editing by James Dalgleish, Rosalba O’Brien and Jonathan Oatis)